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Arthur J Gallagher's Compelling Inorganic Story Impresses

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On Dec 22, 2015, we have issued an updated research report on Arthur J Gallagher & Co.AJG .

Arthur J. Gallagher evolved from a small retail presence in Australia, Canada and New Zealand to become one of the top five brokers in the world. Presently, the insurance broker remains focused on tapping opportunities in the U.K., Australia, New Zealand, Canada and the U.S.

The company's inorganic story seems impressive. Through the first three quarters of 2015, Arthur J. Gallagher has closed almost 30 acquisitions with $180 million in revenues, and it continues with such prudent buyouts that are deemed as strategic fits.

Besides the compelling acquisition portfolio, the insurance broker also boasts positive organic growth for 19 straight quarters in both brokerage and risk management segments.

Arthur J. Gallagher, thus, is delivering sustained top-line growth riding on both organic and inorganic activities.

Arthur J. Gallagher's revenues are geographically diversified. While domestic revenues account for 65%, the remaining comes from international operations. However, insurance brokers expect international revenue contribution toward total revenue to increase year over year in 2015, given the number and size of the non-U.S. acquisitions.

Arthur J. Gallagher is also rewarding its shareholders through dividends hikes and share buybacks. The company still has 10 million shares left under its authorization. These shareholder-friendly moves are cushioned by the company solid operational performance.

Nonetheless, rising expenses hurting margin expansion, unfavorable foreign currency translation weighing on the bottom line and a high debt level keep us watchful.

With respect to earnings performance, Arthur J Gallagher delivered operating net earnings that outperformed the Zacks Consensus Estimate and improved year over year on top-line growth. This Zacks Rank #3 (Hold) insurance broker delivered positive surprises in the three of last four quarters, with an average of 5.6%.

The Zacks Consensus Estimate for 2015 and 2016 is currently pegged at $2.55 per share and $2.84 per share, respectively. These translate into a year-over-year increase of 6.62% in 2015 and 11.51% for 2016.

Stocks to Consider

Some better-ranked insurers are Blue Capital Reinsurance Holdings Ltd. BCRH , eHealth, Inc. EHTH and Validus Holdings, Ltd. VR . Each of these stocks holds a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

GALLAGHER ARTHU (AJG): Free Stock Analysis Report

EHEALTH INC (EHTH): Free Stock Analysis Report

VALIDUS HOLDING (VR): Free Stock Analysis Report

BLUE CAP REINSR (BCRH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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